Financial markets were little moved after Chancellor George Osborne gave a downbeat Autumn Statement
that saw economic growth forecasts slashed and a 'no quick fixes'
message delivered to the country.

The FTSE 100 held onto modest gains, trading 12.1 points higher at 5,881.2 by mid-afternoon after the Chancellor admitted the economy would slightly contract in 2012.

New growth forecasts from the Office
for Budget Responsibility are for a contraction of -0.1 per cent in
2012, 1.2 per cent in 2013 and 2 per cent in 2014. Back in the March
2012 Budget the OBR forecast real UK GDP growth of 0.8 per cent in 2012,
2.0 per cent in 2013 and 2.7 per cent growth in 2014.

Market watch: Chancellor George Osborne's statement under scrutiny

The growth downgrades were widely anticipated and also left the pound virtually unmoved. A pound bought $1.61 (62p) and €1.23 (81p) on the currency markets in early afternoon trading.

The yield on Britain's 10-year gilts - the government bonds that indicate the country's benchmark cost of borrowing - edged down 0.2 percentage points to 1.78 per cent as Osborne stuck doggedly to his austerity agenda.

The Chancellor said the deficit would fall from 7.9 per cent last year to 7.7 per cent this year and 6.7 per cent next year. Net debt was forecast to be 74.7 per cent this year, then 76.8 per cent next year.

But he admitted the period of austerity would have to be extended by one year to 2017/18.

Osborne said the OBR thought the Government was 'on course' to meet its fiscal mandate of eliminating structural deficit in five years time.

But the OBR now believes the Chancellor will miss his second target of debt falling by 2015/16 - this will now happen in 2016/17.

Angus Campbell, head of market analysis at Capital Spreads, said: 'Our Chancellor claimed today that progress is being made, but you only have to look at our mounting debt pile to see that in fact there is very little in the way of improvement to our fiscal difficulties.

'The OBR’s growth forecasts have been unsurprisingly downgraded citing that they were previously based on a much stronger eurozone economy, so if the eurozone is to blame for so much we need to focus on readjusting who we trade with.'

Campbell added: 'A cut of 1 per cent in corporation tax and a cancelation of a fuel duty hike might grab a headline, but it’s not going to enough to stimulate growth meaningfully, something that our economy so desperately needs.

'After having listened to the Chancellor there was little he said that will achieve this and even now the recent downgrades to the UK’s GDP forecasts look like they might be lowered further in the months to come.'

Nick Beecroft, chairman and senior market analyst at Saxo Capital Markets, said: 'As predicted, whilst in many ways innovative, striking a careful balance between fiscal probity and growth promotion, and between rich and poor, this statement is all very boring and predictable, no diversion from the Plan A deficit reduction program, hence stocks, sterling and gilts will be virtually unmoved.'

Joe Rundle, head of trading at ETX Capital, said: 'The big worry is if Osborne has done enough to please rating agencies in order to avoid the UK being stripped of its prized AAA rating.

'Rating agencies have been rather kind to the UK, but that could change now with low growth expected now for the foreseeable future here – for that reason, markets can’t rule out a one-notch downgrade as early as next year.'